Interest rates are at an all time low, by historic standards, and this is great for real estate and purchasing power. Its recently been forecasted by some of my colleagues in the mortgage industry that we will soon be seeing a rise in these low rates.

It would seem counter-intuitive that rates would be rising while our economy still struggles, but here’s why my mortgage professionals are sure that rates will be rising in the near future:

Government Sponsored Entity (GSE) Guarantee Fee will increase by the end of February. This fee is charged to banks by Fannie, Freddie and Ginnie to guarantee the performance of a loan.

In short, the purpose of increasing the fee is to make Government Sponsored Entity (GSE) loans less attractive and push borrowers toward private investors and a more risk based pricing.

To say it another way, the government is unwinding its support of mortgage interest rates and thereby reducing the exposure of GSE’s (Fannie, Freddie and Ginnie – FHA and VA loans). Banks want the government to stop supporting low interest rates and get out of the way. The process has begun and rates will go up beginning March.

As the Government winds down its support of the mortgage industry, fees are going up to make these guaranteed loans more expensive and less attractive… this will push borrowers into conventional loans. Banks are in favor of this fee increase so they can get back to business without government interference.

If you are thinking to buy or refinance, now is the time. Don’t miss out on these low rates which quite possibly won’t be around for much longer. If you have any questions, or are interested in buying or selling a home, please contact me.